Macroscope | Donald Trump could use this tweak to unlock ‘trillions of dollars’ worth of investment in the US
‘US tax reform plans should provide a shot in the arm for the US economy if they can be pushed through’
“We’ll be having a big announcement on Wednesday having to do with tax reform,” said US President Donald Trump on Friday. In truth, speed is of the essence as warning lights begin to flicker on the dashboard of the US economy.
United States retail sales fell for a second month in succession in March, down 0.2 per cent after a 0.3 per cent drop in February. The US consumer price index (CPI) fell 0.3 per cent in March, the first fall in 13 months and the biggest drop since January 2015.
As a consequence of more mixed US economic data Japan’s Bank of Tokyo-Mitsubishi UFJ noted, on April 19, that in 2017 “the probability of two further rate increases by the Federal Reserve has now completely evaporated.”
Consultancy firm McKinsey may have warned last week of “a looming interest rate storm” for Chinese banks, arguing that China is “very likely” to have entered a rate-increase cycle to better cope with US rate rises, but markets have currently dialled back US rate rise expectations.
Of course markets can be fickle, and a couple of poor retail sales figures and a single monthly drop in consumer prices won’t necessarily deter Fed policymakers, but there are other signs, too, that all may not be well with the US economy. Some might even question whether the US economy can actually bear much higher interest rates.